HSBC resumes new self build mortgage deals after temporary closure

A woman signing a mortgage contract
HSBC temporarily withdrew all mortgage options for self builders due to a suspected increase in interest rates (Image credit: Getty Images)

It was announced on Thursday that all HSBC mortgage deals for self builders and all new borrowers were temporarily withdrawn due to the challenges faced by the UK lending market.

HSBC announced they were withdrawing all its residential and buy-to-let products for "new business," on Thursday 8th June. These products went back on the market on Monday 12th June after the interest rates being offered were revised. Existing customers could still access mortgage products and rates. 

This followed data which showed that nearly 10% of mortgages have been removed from the market, making it more difficult for those looking to self build to secure funding for their project.

Reducing mortgage options for self builders

The withdrawal of mortgage options by HSBC signified a worsening situation for those looking for a new self build mortgage or renovation mortgage.

Announcing the decision on Thursday with only two-hours notice given to mortgage brokers, HSBC said the move was "to ensure that we can stay within our operational capacity and meet our customer service commitments".

This decision by HSBC followed similar moves by Nationwide, a rival lender, who cited the need to raise fixed rates for new borrowing in order to ensure sustainability.

This trend aligns with data from the financial monitoring service MoneyFacts, which reveals that nearly 10% of mortgages have been eliminated from the market due to concerns surrounding the rise in interest rates.

David Hannah, Chairman at Cornerstone Group International, provided his insights on the current state of the property market:

"The increasing mortgage rates and lenders' withdrawal of mortgage deals, driven by higher-than-expected inflation figures, are unwelcome news for homeowners."

"We are already witnessing unprecedented levels of unaffordability in the UK property market, and HSBC's decision to withdraw mortgage deals will only worsen the situation for potential buyers in the property market."

Mortgage rates set to rise

Due to the slower-than-expected decline in inflation. As a result, there are predictions of a potential interest rate hike by the Bank of England, with estimates suggesting an increase from the current rate of 4.5% to as high as 5.5%.

These circumstances have intensified the pressures on lenders to raise mortgage rates. HSBC responded to this by temporarily withdrawing all mortgage deals for self builders as well as all their other mortgage products, although this decision has now been reversed.

However, it is expected that mortgage rates will increase meaning those looking to find a self build mortgage or a renovation mortgage can expect to be paying a higher interest rate.

Although, despite a recent increase in the Bank of England base rate the average 5-year fixed mortgage, requiring a 15% deposit, currently stands at only 4.56% which is is lower than the 5.89% rate recorded last October by Rightmove.

What other mortgages were affected?

The recent announcement by HSBC impacted all residential and buy-to-let mortgage products for "new business." As a result, first-time buyers anticipated a reduction in available mortgage options and higher interest rates.

According to financial data provided by Moneyfacts, there has been an increase in average two-year fixed-rate mortgages, rising from 5.49% to 5.82% since the beginning of June. Similarly, the average five-year fixed-rate deal has experienced an increase from 5.17% to 5.49% within the same period.

Additionally, the Nationwide building society has revealed its plan to raise mortgage rates on new fixed deals by up to 0.45 percentage points in response to higher-than-expected inflation figures.

This means all those looking for a mortgage may find higher-than-expected mortgage rates.

Those planning on buying a house can take a look at our house viewing checklist as well as look at our guide on building surveys.

Joseph Mullane
News Editor

News Editor Joseph has previously written for Today’s Media and Chambers & Partners, focusing on news for conveyancers and industry professionals.  Joseph has just started his own self build project, building his own home on his family’s farm with planning permission for a timber frame, three-bedroom house in a one-acre field. The foundation work has already begun and he hopes to have the home built in the next year. Prior to this he renovated his family's home as well as doing several DIY projects, including installing a shower, building sheds, and livestock fences and shelters for the farm’s animals. Outside of homebuilding, Joseph loves rugby and has written for Rugby World, the world’s largest rugby magazine.